What Pennsylvania should do is get out of the liquor business

The Pennsylvania Liquor Control Board’s decision to raise prices this week on hundreds of brands of wines and spirits is just the latest reminder of the need for lawmakers to privatize the State Stores.

The Liquor (out of) Control Board refused to disclose which brands received the price increase. But the costs of more than 400 products were increased by at least $1. More than two dozen of those items were jacked up between $2 and $100.

The price hike comes a year after Gov. Wolf signed Act 39, the latest Harrisburg Band-Aid designed to move the state beyond the antiquated Prohibition-era liquor laws. One of the “reforms” included in the measure gave the Liquor Control Board the ability to implement more flexible (read: higher) pricing.

Previously, the LCB had to settle for marking up its liquor products by just 30 percent across the board. Under the new and not-so-improved measure, the LCB can increase prices as much as it wants.

Of course, that’s not what LCB chairman Tim Holden told lawmakers would happen less than a year ago. “It continues to be our intention, and I repeat that, to not broadly increase retail prices on our best-selling items,” Holden said at a hearing in November.

Then again, it probably wasn’t anyone’s intention to continue to charge consumers the Johnstown Flood Tax that the General Assembly enacted in 1936. The initial 10 percent tax on liquor was supposed to provide temporary funding to flood victims. Instead, the liquor tax was raised to 15 percent in 1963 and then to 18 percent in 1968, where it remains. (The flood tax is in addition to the sales tax of 6 percent in the suburbs and 8 percent in Philadelphia.)

The latest price boost by the Liquor Control Board is almost as brazen as continuing the 81-year-old flood tax. The agency said the latest increases were all about maximizing revenue to help fund the state budget.

Though the flexible pricing was expected to generate more tax revenue, the state was also supposed to use its buying power to negotiate lower prices from wholesalers. The state did lower prices on a handful of items last year, but consumers have yet to see any major saving. Especially when compared to prices in New Jersey and Delaware.

For example, a bottle of Kendall Jackson chardonnay costs 52 percent more in Pennsylvania (including the 6 percent sales tax) than at the Total Wine stores just over the state line in Delaware.

Of course, there is a simple solution to the state’s exorbitant pricing: Pennsylvania should get out of the liquor business altogether. Selling liquor licenses to private retailers would generate hundreds of millions of dollars for state coffers. More important, allowing competition would result in lower prices, greater selection, and better service for consumers.

Past efforts to privatize the State Store system have failed. In response, lawmakers have implemented incremental reforms over the years. But each Band-Aid only underscores why the state has no business being in the liquor business.

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